Tesco back on form as boost from Booker takeover recalls glory days

Tesco proved sceptics wrong on Friday as chief executive Dave Lewis lauded the supermarket chain’s £3.7 billion marriage with wholesaler Booker.

Lewis, whose swoop on the cash-and-carry chain last January initially drew a wave of criticism, said: “We are delighted with the progress and we’re beginning to realise the growth opportunities after the merger.”

The grocer’s same-store sales were up 1.8% for the 13 weeks to May 26, a significant improvement from a meagre 0.4% the previous quarter. “It’s our strongest quarter since 2011,” added Lewis ahead of its annual general meeting today.

This is partly down to a booming Booker, which supplies corner shops, restaurants, pubs and bars, where same-store sales jumped 14.3%. But the supermarket chain’s same-store sales growth in Britain was not negligible either, up by 2.1%.

In contrast, Central Europe and Asia saw a decline of 1% and 9% respectively.

The company has been shifting more of its own-brand wares and is keeping a lid on prices to stay competitive.

Tesco is experimenting with different store formats, which sell Booker’s top 30 product lines, with a view to expand it across the country if it’s lucrative.

“Professional caterers are topping up more, but large purchases are something that families who shop with us appreciate too,” added Lewis.

Thanks to Tesco’s distribution centres, Booker’s clients now get their orders the next day.

The combined business expects cost savings and benefits of £200 million on the back of the deal in the next three years.

Shares edged up to 254.9p but they were still trading lower than 290p in 2014 before Tesco was engulfed in a financial scandal that Lewis discovered when he arrived.

The chief executive has also faced intense competition from the rise of German discounters Aldi and Lidl. To recalibrate the business and cope with the mountain of debt he offloaded other divisions and has cut thousands of jobs.